|
I read that in the US it is standard practice to give employees equity. It is not very common in the Middle East, but I feel it is important. Do you have any advice about how to think about doing such a thing? What are the typical ranges? |
|
@Uber3eek, @Ammar - Your numbers seem a bit on the high side from my experience. This is always a tricky area with no real right answers because it has so many variables. Here is my view for seed stage startups: If the founding team is strong and complete then you do not need to set aside a large options pool. I would suggest an options pool of ~10%. Larger option pools mean you still have to make big hires, i.e. still need to find a CEO or CTO. For employees, there are several batches you can reward an employee. The first is on hire and I would suggest something in the range of 0.1% to 0.5%, for a non-exec hire (e.g. engineer), depending on how hot you are for the person. I typically air on the conservative side and reward more later. The second batches are issued to employees for stellar performance on an annual basis. They create value, they get a piece of the action. Again do this in increments of 0% to 0.5% depending on performance. Of course all these numbers keep shrinking as the company gets larger and more mature. Some closing thoughts:
|
|
You should form an option pool to issue options to employees. Usually a 10-20% option pool is reasonable on the first investment round. If you are giving a decent salary then only a portion of that pool per employee is decent. It obviously depends on the employee and should range from 0.5% to 5%, exec types get more ... |
|
There is no rule about this, but the option pool is usually between 10% to 25% which also includes top executives. This is the number of shares set aside for future issuance to employees. You just have to set it aside and distribute some equity from it annually as bonus to employees. |
